Opinion: GOP’s Obamacare ‘do-over’ is a tax and no-spend plan

TimMullaney

Writer

Bloomberg

For years now, Democrats have mocked Congressional Republicans for voting to repeal the Affordable Care Act – a.k.a. Obamacare -- a hundred million bajillion times without offering any alternative of their own. And now they have.

It’s no improvement.

The salvo came in a New York Times commentary late last week, where narrowly defeated Virginia Senate candidate Ed Gillespie proposed what he called an Obamacare “do-over.” Trouble is, the details of his plan mean millions fewer Americans covered, a big tax hike for the upper-middle class, and — hey, whaddaya know? — a new tax credit for top brackets. The idea is to cut the ACA’s health-care subsidies — but his plan really just moves them up the income chain.

Let’s look at exactly what Gillespie, a former Republican National Committee chair and longtime lobbyist, proposes:

Gillespie says he would keep the $143 billion annual exemption of money that employers spend on insurance from workers’ taxable income — even though 2008 GOP presidential candidate John McCain correctly fingered that break as a primary reason people consume health care with little attention to costs.

Then he would offer tax credits to “all individuals and families who buy health insurance on their own.’’ The credits would give “a family of four headed by two 40-year olds $6,000 a year to spend on insurance.’’

Sound good? It isn’t, really.

Exactly such a family, living in Richmond, Va. and earning the national median family income of $51,017, already gets a $489.45 monthly tax credit under ACA, according to Healthcare.gov. So Gillespie would give his own showcase family all of $10.55 a month more. Under ACA, the cheapest bronze plan would cost that family $28 a month. If its price didn’t rise under Gillespie’s plan, it would cost $17.

If that same family made $450,000 a year, the cutoff for the top tax income-tax bracket, Gillespie would give them a $6,000 credit too. Under ACA, they pay their own way. “Personal responsibility” is the GOP mantra — for the other guy’s presumed voters.

There would be many other huge differences too.

First, repealing the mandate and Gillespie’s slight narrowing of the ACA’s ban on discrimination against people with pre-existing conditions would eventually drive up the cost of coverage, especially for sick people (and some couldn’t get it at all). One way the ACA contains costs is making healthy people pay premiums. Pull that thread, and the sweater unravels, helping to deliver mid-aughts health-insurance inflation rather than much-lower price hikes we see now.

Second, lower in the editorial piece, Gillespie casually mentions he would cap deductibility of employer-provided health insurance at $20,000 per year — $7,000 less than the $27,000 per family threshold for ACA’s Cadillac tax in 2018, which imposes a 40% excise tax on the amount by which the premium exceeds $27,000. If your insurance costs about $27,000 — as mine does — that adds a couple of grand right there.

Thus, Gillespie’s plan will do more than the Cadillac tax to induce companies to end coverage and turn people loose in the individual market, which he says he wants to avoid. And it lowers by $7,000 the amount employers would, in a logical world, raise families’ pay to offset cancelled group coverage. It would also take away the ACA’s incentive for employer plans to contain medical costs, so they can stay under the threshold. That’s only the most important market-based cost-control the ACA contains.

Third, Gillespie would undo the Medicaid expansion that covers 11 million working-class people, according to ACASignups.net. In Richmond, the tax credits replacing Medicaid expansion would buy Gillespie’s model family of four a bronze plan with a $12,600 yearly deductible, making them basically useless.

Bottom-line, the new-and-improved GOP plan does away with near-guaranteed coverage and raises your taxes if you work at a company with good benefits. It uses your money to pay for tax breaks for people who make too much to qualify for ACA subsidies. And it would risk rekindling premium inflation by taking healthy people out of the insured pool and taking the cost-control heat off employers.

I went to college with Gillespie; he’s a good man and his plan is a sincere (if ideological) effort. An alumni- magazine profile noted he walks Catholic University’s campus greeting cafeteria workers he knew back when, some eligible for the Medicaid expansion he’d repeal. He grew up in a military town in New Jersey and is a regular guy. You can care and still be mistaken.

We took German 101 together, annoying a beleaguered instructor by group-hugging to celebrate our “reunion” when we and a third buddy all attended the same class for the first time in a month. Eddie, God knows we didn’t learn any German, Ich hatte gehoffte, dass du mehr mathe gelernt.

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